Date:29/10/2008 URL: http://www.thehindu.com/2008/10/29/stories/2008102954770600.htm

Karnataka

Iron ore price fall worries miners, bankers

M. Ahiraj

The average price of ore was $ 145 a tonne till recently
It came down to $ 70 a tonne last month; China stops orders

BELLARY: The boom in iron ore exports from Bellary district, which flourished for about five years in view of the demand in the international market, seems to have come to an end, if the lack of movement of iron ore from the district due to the fall in the price of iron ore is any indication.

Against an average price of $ 145 a tonne till recently, the price came down to $ 65 to $ 70 a tonne last month. As a result, ore extraction is subdued and transportation of iron ore has almost come to a halt.

“For the past five years, we used to see a large number of lorries passing through the city causing frequent traffic jams and today, we have been seeing less than 100 lorries carrying ore during the night,” said Madhusudhan, a resident of Bellary city.

“More than the price coming down, there are no buyers after China stopped placing its orders,” Rahul Baldota of the Hospet-based MSPL group and president of the organisation of the mine owners association, told The Hindu.

With the boom, the movement of iron ore, including fines, by road towards Goa, Karwar and Mangalore and towards Chennai and Visakhapatnam ports, went up at least 10 folds (not less than 16,000 to 20,000 lorries were transporting iron ore every day). The Railways also operated 22 rakes each consisting 58 wagons with a carrying capacity of 3,850 tonnes towards Goa, Chennai and Visakhapatnam ports. On an average, around 40 million tonnes of ore were being transported annually from the State, of which around 70 per cent to 75 per cent was from the district. During the boom, many invested in trading and also in setting up beneficiation plants (a process of improving the quality of the low grade ore), sponge iron units, procured heavy earth moving machineries on behalf of the mining companies, purchased fleets of lorries to transport the ore and the like.

Now, lorries and heavy earth moving machineries have been lying idle and the owners are worried over repayment of loans and also payment of wages to drivers and cleaners. And, traders, who have stock on hand, are sitting idle.

Even financial institutions are worried about the recovery of loans and are thinking twice whether to release funds for units which are under various stages of construction.

Sources in the Railways said that the movement of iron ore on rails had come down drastically. Till last month iron ore was being transported in 22 rakes daily and it has now come down to 12, the sources added.

As a result of the prices coming down and no sale, iron ore is lying in the stockyards and production is not being taken up on a large-scale.